March 2003

Enterprise IP Telephony: Evaluating The Options

BY SEAN O'MALLEY

Among the many anticipated enterprise trends of this year, few are as pronounced or as poised for growth as the movement toward implementing IP communications technologies. In today�s tumultuous economy, many businesses are turning to IP telephony solutions to lower costs and to leverage new communications methodologies in support of their customers, teleworkers, contractors, and mobile workers.

While there has been much interest in IP technologies, making the choice among IP-PBXs and hosted IP Centrex solutions is often challenging given the great differences in their capabilities and costs. The key to implementing the right solution is understanding the balance between a business� performance needs and budgetary constraints -- not just at the outset, but years down the road. A key part of this decision process requires detailed total cost of ownership analysis.

With the economics behind implementing IP-based technologies being so clear, the first option a business typically considers is whether the existing traditional PBX can be upgraded to support some level of IP telephony. This solution can be used to extend the life of current in-house infrastructure, but it carries a hefty initial and on-going cost that typically makes this solution cost prohibitive, with limited if any new features. This is a result of upgrades allowing businesses to take advantage of IP transport for lower telecom charges (Toll Bypass) but not allowing any real cost savings to occur from reductions in moves, adds, and changes (MACs), staffing, maintenance, and the productivity improvements from new converged applications.

A second option is a �true� IP-PBX, which typically employs IP signaling throughout the core architecture and delivers some new PC-based productivity features, as well as the ability to utilize IP transport. These systems are also premise-based and generally require new IP phones and PC software for every user. They also require IT staff (not just telecom-qualified employees) to manage day-to-day operation and associated LAN issues. Since many businesses do not have additional IT resources to provide this extra support, they may have to augment their staff with external experts, adding to the overall expense. Due to the lack of IT resources at smaller sites such as branch offices, an IP-PBX might not be a viable solution, even though these smaller offices are often where the benefits of IP telephony are most needed, such as support for remote workers and new mobility features.

A newer option that is somewhat less well known but quickly gaining market share is IP Centrex, sometimes called Hosted PBX, which provides advanced IP-PBX-type features and then some. IP Centrex resides in the service provider�s network, and telephony services are delivered to the business user�s location via common broadband connections such as a T1 or DSL line. Rather than buying another premise-based system and investing a large amount of up-front capital, businesses subscribe to IP Centrex services on a per-user basis and can easily upsize or downsize capacity as needed.

With IP Centrex, there is no longer any premise-based system to manage other than the phones themselves, which greatly reduces the overall burden of system management and operation. New IP Centrex services provide all the advantages of greater usability and IP transport, along with many new applications and features, without large capital outlays or IT management hassles. In addition, this solution provides greater flexibility for teleworkers and mobile staff, since these services can span the full global reach of the service provider�s network rather than just the business� LAN or VPN.

The net-net of current total cost of ownership analysis demonstrates that IP Centrex is the most cost competitive IP-based solution for distributed enterprises and SMBs. Total cost of ownership advantage for IP Centrex over IP PBXs for a 100-person office averages 33 percent ($117 versus $78) over a three-year period. This ends up being over $140,000 dollars in absolute terms -- enough to make any CFO sit up and listen.

While IP-based capabilities are enough to whet the appetite of any IT professional, the ultimate decision of which path is best (IP Centex versus IP PBX) understandably boils down to its cost of implementation and ongoing management. Recently, the industry research firm InfoTech issued a comprehensive report (IP Telephony Total Cost of Ownership: A Case for the Implementation of IP Centrex Hosted Service, October 2001) evaluating the total cost of ownership for the IP-PBX and IP Centrex solutions over a three-year period. Based on practical implementations for a 100-user company reviewed over a three-year period, IP Centrex implementations demonstrated a total cost of ownership advantage over IP PBX solutions -- a clear value for distributed enterprises (where 70 percent of remote sites have less than 100 employees, according to InfoTech) and smaller businesses as well.

There are many factors to consider in evaluating these new communications solutions, and cost is one among many. The confluence of traditional telephony with advanced IP-based communications functions and features has brought about a host of new choices for businesses that provide undisputed advantages. A unified environment gives these advanced services a new level of usability that takes out much of the management difficulty, ensuring that all employees benefit from advanced features. With these new capabilities, which are accessible via Web browser on virtually any wireless or landline Internet access device, users now get the convenience of being able to work transparently from almost any location with the same support systems as their office-dwelling co-workers. Businesses will experience increased productivity from its employees and will benefit from lower costs through on-net routing of calls, bypassing toll networks.

The acid test for any long-term solution is in how well it serves the technical needs of both in-office and remote/mobile workers versus its cost to the enterprise. Companies that evaluate their various IP telephony options using apples-to-apples cost and performance comparisons will ensure that they secure a comfortable seat on the IP telephony bandwagon without paying the top-dollar fare.

Sean O�Malley is director strategic marketing at Sylantro Systems, a leader in the market for advanced Hosted PBX and IP Centrex services. With a unique combination of advanced applications, a carrier-class platform, and proven go-to-market services, Sylantro allows service providers to rapidly deliver high-value, high-margin managed telephony services.

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